In the wake of the protests in
Ferguson, Mo., after a white
police officer killed unarmed
black teenager Michael Brown,
a local legal aid organization released a
report that shed light on long-simmering
tensions between the community and the
criminal justice system. The report revealed
that African-Americans in Ferguson and
nearby communities were far more likely to
be arrested for nonviolent offenses such as
traffic violations, charged exorbitant fines and
fees, and jailed when they didn’t, and often
couldn’t, pay. For years, residents had complained
that the aim of these practices was
not to protect public safety but to increase
city revenues on the backs of those least able
to pay or fight back. Until a legal settlement
with the US Department of Justice, court fines
and fees were the Ferguson city government’s
second-largest source of income.

Revenue schemes that target the poor
are not confined to a few jurisdictions or to
the justice system. Rather, as Daniel Hatcher
documents in his important new book, The Poverty
Industry, states and municipalities across the
country, working with private contractors,
have turned a range of vulnerable populations
into sources of income for cash-strapped
agencies, general government funds, and
corporate coffers. Motivated in part by severe
funding cuts, agencies in red states and
blue states alike divert money intended to
help abused and neglected children, disabled
youth, the elderly poor, and impoverished
families; state contractors use sophisticated
analytics to determine how to squeeze even
more dollars from them. “[A]s policy experts
across the political spectrum debate
the best structure for government aid programs,
a massive siphoning of the safety net is
occurring behind the scenes,” Hatcher writes.
These practices are increasing even in the face
of civil rights concerns, lawsuits, and multimillion-
dollar fraud settlements.

Hatcher, a law professor at the University
of Baltimore, tells such a damning tale that as
I started reading, I wondered if he was engaging
in hyperbole. But he convinced me that he
wasn’t through a forceful systems analysis, a
mass of documents obtained through Freedom
of Information Act and court filings, and
heartbreaking stories about the human toll.

How the poverty industry operates varies
from program to program and system to
system. Foster care offers especially egregious
examples. An orphan named Alex who spent
six years in Maryland foster care did not know
he was eligible to receive Social Security survivor
benefits, which could have given him the
financial resources to help with his transition
out of foster care at age 18. He did not know
that the foster care agency received those
benefits as his representative and, although it
had an obligation to use the money in his best
interest, instead put it toward its own budget.
Alex left foster care penniless; the Maryland
foster care agency hired a contractor to learn
how to obtain more funds from kids like him.

If a foster parent or social worker were to
pocket a child’s benefits for his or her own
use, we would rightly call it theft. But foster
care agencies take more than $250 million
a year in assets from children in their care.
They claim that this advances the greater good, because adding to their fiscal capacity
leads to improved services. But even if one
accepts the dubious assertion that human
services agencies should fund themselves by
extracting resources from the people they
exist to serve, Hatcher shows that in practice,
this rationale fails. Contractors take a big cut,
and much of the rest winds up in state general
funds, rather than devoted to people in need.

Hatcher has done a great public service by
shining a light on these massive distortions.
However, the book would be even stronger
with more data demonstrating these exploitative
strategies’ results. How much money do
private contractors earn in this way? How
many states prioritize fiscal interest over
social welfare in various programs? How
many people like Alex are hurt? What role
do these dynamics play in the cycle of poverty?
The book left me hungry to know more.

I also wish that Hatcher had explored the
racial dimensions of these revenue-generating
maneuvers. He barely touches on the fact that
aid programs and systems disproportionately
serve people of color. As those programs and
systems mine their clients for resources, it’s
critical to call out exactly which communities
bear the greatest impact. If Ferguson taught
the United States anything, it’s that we cannot
afford to ignore the ways in which implicit
bias and institutional racism drive inequitable,
even cynical, government policies and practices
cloaked as public service.

How can we address the injustices that
Hatcher has exposed? Certainly, stronger
laws and enforcement are needed to protect
program beneficiaries from government misuse
of resources. Hatcher also recommends
structural solutions, including clarifying and
enforcing the purpose of aid programs and
restoring their fiscal integrity. He makes
clear that the poverty industry’s misuse of
funds does not mean that funding should
be cut—only that we should make sure the
resources reach those in need. Our society
has debated the best way to help the poor for
decades. But surely we can agree that when
funds are allocated with the stated intent of
helping vulnerable Americans, they should
be used that way.

Angela Glover Blackwell is president and CEO of PolicyLink, a national institution advancing solutions to achieve economic and racial equity. A lawyer by training and former senior vice president at the Rockefeller Foundation, she also founded the Urban Strategies Council in Oakland, Calif.

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